Precision Castparts to obtain $200 million term loan, $300 million bridge loan for acquisition

By Sara Rosenberg

New York, Aug. 18 - Precision Castparts Corp. has received commitments for a $200 million incremental term loan and a $300 million bridge facility, to be taken out by a senior notes capital markets transaction, to help fund the acquisition of SPS Technologies Inc. for $575 million.

In addition, the company's existing credit facility will be terminated and replaced with a new five-year revolver and term loan.

Commitments for the acquisition financing were provided by Bank of America.

"This acquisition will strengthen Precision Castparts Corp.'s (PCC) core business as a leading supplier of complex metal products for aerospace customers and provide significant cost-saving synergies, right away and well into the future," said Mark Donegan, chairman and chief executive officer, in a news release. "In addition, the acquisition will further diversify our business by enhancing exposure to new markets including automotive applications, which represented approximately one-quarter of SPS's 2002 sales."

Under the acquisition agreement, SPS shareholders may elect to receive either cash or PCC stock as follows: $43.00 in cash per share, with the total cash consideration fixed at approximately $278 million, or at a fixed exchange ratio of 1.36 shares of PCC common stock, with a total stock consideration of approximately 8.8 million shares of PCC common stock, subject to pro-ration to achieve an aggregate split of half cash and half stock.

The transaction is, which has been approved by the boards of directors of both companies, is expected to close during the fourth quarter of calendar 2003.

In response to this announcement, Standard & Poor's placed its ratings on Precision Castparts, including the BBB- corporate credit rating, on CreditWatch with negative implications, reflecting the company's weaker financial profile due to the increased debt from the acquisition and general integration risks.

Precision Castparts is a Portland, Ore. manufacturer of complex metal components and products. SPS Technologies is a Jenkintown, Pa. producer of high-strength fasteners and precision components for the aerospace, automotive and industrial markets, superalloys and specialty metals in ingot and powder form, waxes, metalworking tools and magnetic products.

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